A year or so ago, the work of the late economist Hyman Minsky was known to only a small band of devoted followers. All that has changed since the onset of the current financial crisis. Today, Minsky’s financial instability hypothesis — the notion that economic stability encourages behavior on Wall Street and beyond that renders the financial system increasingly fragile — is attracting far more attention. Yet Minsky was interested not only in the buildup to a crisis but also in how depressions could be avoided and what measures were necessary to prevent future crises from occurring.Most economists believe that the economy tends to be self-equilibrating and that crises occur only because of outside (or “exogenous” in econospeak) shocks to the system. In his book Stabilizing an Unstable Economy (1986), Minsky, however, argued that Wall Street and other financial players “generate destabilizing forces, and from time to time the financial...